AIM-quoted diamond mining and exploration company, Firestone Diamonds recently conducted its fourth diamond sale of the year in Gaborone, Botswana.
The company sold all the diamonds (47,576 carats) that were on offer, helping it realise $2.8 million.
The last time Firestone Diamonds conducted a diamond auction was in September this year but things went terribly wrong.
It had a total of 24,109 carats that were available for sale, an increase of 69 percent from the July diamond sale but only 3,395 carats were sold for gross proceeds of $863,037.
The remaining 20, 714 carats, comprising smaller diamonds, were withdrawn after failing to achieve reserve prices.
Firestone said at the time that the results of the diamond sale reflected a drop in overall rough diamond prices of between 15 to 20 percent since the beginning of August this year and significant volatility in prices for selected categories of diamonds.
“This has been primarily driven by recent uncertainty in international financial markets,” it said then.
However, the latest Firestone tender has painted a different story from the September auction, as some stability has returned to the market buoyed by a growing demand from China and India.
The 47 576 carats that were sold during the tender also included about 20 000 carats that failed to achieve reserve prices in September.
This, coupled with millions generated during the sale, was enough testimony to the stability that Firestone said had returned to the rough diamond market.
"We are pleased to have been able to sell all of the diamond production offered at our recent tender, the results of which indicate that some stability has returned to the rough diamond market after the volatility of the past few months,” said Firestone Diamonds chief executive Tim Wilkes.
“We remain positive about the fundamentals of the diamond market, with long term demand, which is largely driven by growth in India and China, expected to continue to outstrip supply, and expect to see prices for both Liqhobong and BK11 production increase in 2012."
The diamond mining and exploration company also noted that apart from the growing demand from China and India, the other factor that had stabilised the market was the limited rough diamond supply.
No new significant diamond deposits were expected to be discovered and commercially developed in the next few years.
Assuming Marange diamond fields were not significant, then major diamond mines were last discovered 15-20 years ago. Firestone said this shortfall (artificial or not) was expected to limit any further significant decreases in rough diamond prices, much to the pleasure of several miners.
The company had last month said De Beers and Alrosa - the two largest diamond producers in the world – were seen limiting their volume of sales in the short term in order to promote a stable pricing environment.
Firestone also said that the number of buyers that attended and showed interest in the recent tender was significantly higher than in September, adding that it had gone back to the levels seen at the July tender.
Firestone sold 14,248 carats for gross proceeds of about $2 million during the July tender.
The company interpreted the increase in buyers during the September tender as a sign of a stability and resurging appetite for rough diamonds.
The Diamond Trading Company (DTC) boss Varda Shine also said recently that the Christmas sale, which started last week after Thanksgiving holidays in the U.S, will spur demand in the short-term.
She said the coming Indian wedding season and the Chinese New Year in January will also determine how good the company (and indeed the whole industry) would have performed this year.
Shine also predicted that the market will likely see the global consumer demand ending the year above 10 percent.
“[This] is record. It has never happened before in this industry," she said.
So by-and-large, if the improvement that Firestone recorded in demand and sales can be used as a harbinger on the path the rough diamond market will take till the end of the year then a re-bound or at least stability of some sort is expected.
Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished
